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Osborne promises "most generous" tax relief for games

Chancellor George Osborne has promised the corporation tax reliefs for the video game industry will be "among the most generous in the world" in his autumn statement today.

"Following consultation on their design, the government will ensure that the reliefs are among the most generous in the world by offering a payable tax credit for all three reliefs worth 25 per cent of qualifying expenditure," said the official statement from the treasury.

The corporation tax reliefs for the creative sector, which also includes animation and television production, will still come into effect from April 13, and will offer qualifying companies the chance to, "choose between an additional deduction at a rate of 100 per cent of enhanceable expenditure or a payable tax credit at a rate of 25 per cent of qualifying losses surrendered."

"Having run an independent games development and publishing company for many years, seeing this happen is great and long overdue news"

Andy Payne, chairman, UKIE

The statement also promised further investment in the existing Skills Investment Fund administered by Creative Skillset over the next two years, which will add video games to its remit. The government will match industry contributions of up to £6 million over the next two years.

The statement also announced a reduction in the main corporation tax to 21 per cent next year, better broadband for UK cities and £600 million in science research spending.

“Tax breaks for games production will ensure that the UK remains a world leader in the high technology video games development industry. A single 25 per cent level of relief will be simple to administer and economically impactful. Yet we will have to monitor the actions of our competitors: the province of Quebec in Canada already boasts a 37.5 per cent level of tax relief," said TIGA's Dr Richard Wilson, who also hoped the measure would help make high skill, export focused industries a bigger player in the UK economy.

“The provision of match funding for training and development in the creative industries could enhance productivity. It could also help to promote more sustainable companies, particularly if managers from small and medium-sized enterprises can draw on the funds to develop the vital business and strategic skills necessary for achieving sustained growth.”

UKIE also showed enthusiasm for the new tax reliefs, calling the move a "timely and favourable step to foster continued industry growth." UKIE highlighted several points as particularly beneficial to the future of the UK games industry, specifically the deicision to raise UKTI funding by 25 per cent and the 21 per cent reduction in Corporation tax by 2014.

However, with the allocation of the £6 million creative skills fund yet to be decided, UKIE has issued a "strong call" for the games industry's share to be in line with that for TV and film.

"It's great that government seem be listening to the industry. Games are a tough global business and having tax breaks will make it easier for our business to compete"

David Bailey, CEO, Mediatonic

“This first detail of the tax relief seems a positive step for our members and the wider industry," said UKIE CEO Dr. Jo Twist. "Whilst we called for a 30 per cent rate of relief for the scheme, UKIE was nonetheless pleased to see the rate set at 25 per cent, giving the games sector parity with other UK creative industries.

“As soon as the full draft legislation is published we'll be poring over the finer details to ensure that the fine tuning and implementation of the proposal is fully in line with the needs of our industry.”

Ian Livingstone, vice chairman of UKIE and life president of Eidos, claimed that this new assistance for the games industry, along with a renewed focus on computer science in the national curriculum, will help the UK to reclaim its standing in the global industry.

"Today's announcement of additional skills funding is more positive news, and a welcome sign of the games industry being seen as having the potential to be a leading growth industry to help drive the digital economy of the UK in the 21st century," he said.

Osborne confirmed the tax relief for the industry back in March, with the promise to "support our brilliant video games and animations industries."

The official budget report then stated the tax breaks would be introduced next April, and would see relief of £15 million in 2013-14, and £35 million in 2014-15.

GamesIndustry International will update this story with reactions UK developers as they happen.

21 Comments

Hopefully Bruce. This is a great first step towards closing the gap on countries like Canada and a sign of the increasingly fruitful relationship between the UK Games Industry and government thanks to the work done by TIGA, UKIE and the like.

Hah ha Bruce, I was typing the same thing, but you beat me to the punchline (damn 3G , its too slow!)

So yes, who's coming back from Canada?
More importantly, can someone translate the impact and meaning of what it all means for everyone?

The corporation tax reliefs for the creative sector, which also includes animation and television production, will still come into effect from April 13, and will offer qualifying companies the chance to, "choose between an additional deduction at a rate of 100 per cent of enhanceable expenditure or a payable tax credit at a rate of 25 per cent of qualifying losses surrendered."

Glad to see that the government is finally regarding games development as a serious industry. I'm also excited to see how this affects prospects for graduates hoping to enter the games industry, as it seems that most studios want to take on interns and graduates but aren't in a comfortable enough financial situation to do so. I've been contemplating doing the placement year of my degree in Canada, but hopefully this tax break will encourage some kind-hearted UK studio to take a chance and hire me!

It annoys me every time people here rag on about people who left for Canada. You're starting to sound bitter. The simple fact is that no, I'm not coming back. It's not just about money, it's about the quality of life and the city I choose to live in.

And as I keep saying, Canada as a whole is not equal. In B.C. we don't get the breaks Quebec and Ontario are getting. In fact Vancouver is an expensive place to develop games and there aren't many companies left here.

The tax breaks will help some companies to make ends meet, it's not going to give you all a huge salary boost and it's not going to bring people back.

Speaking for myself, I don't think I'll be coming back if I have any choice in the matter. I've grown to like it over here for many reasons, one of which being that I'm the type of person that prefers the experience of living in a different country, to the comforts of home.

I don't think that's a particularly bad thing for the industry though. The UK is a small country, I think it's better that people like me move out and make room for graduates who want to get their first step on the career ladder, and those that can't or won't move to other countries (for family reasons, or just because they prefer to live in the UK).

I think with regards to broadband, they have to start somewhere, so the cities make sense, and that will unfortunately come with extensive digging. Even within london though, the broadband needs upgrading to super fast, so I guess we'll watch this space to see if that happens - maybe then it'll bring elements of the cloud as well

Moving abroad is not always dictated by money. Me, for example, I wouldn't have learned half of what I know if I stayed at home. Besides nowdays for every person leaving a country there another one moving in. I did meet Canadian people living here in the UK, and I think the games ecosystem here is especially good. One example is Nicola Salmoria, the original creator of the Mame, who works for a British company, and I'm fairly sure there is at least one ex-Milestone programmer working in his same company. That's just to mention one.

I'll hold my hand up to Kieren's comment - I was one of those who used to BE bitter about those who have left - not just sound it. Being married to a Quebec girl, I had a few negative experiences in Montreal (mainly people refusing to talk to me in English, including a couple of waiters - bizarre). And I also, at the risk of sounding cheesy, love my country, and want to see it do well - and that can only happen if it retains its talent. But I've come to accept that you can't really blame people for moving abroad - they're better paid, property is cheaper, and they're closer to hockey (Bryan, the Leafs don't count, but you're not a million miles from Montreal if you want to go watch how it's played:)). And plus, it's not like the government here has fallen over itself to help either the industry or working people in general. We're borrowing £150bn a year, making billions in terms of cuts, and yet STILL giving £12bn a year away in foreign aid.

Honestly, most of the people who have gone won't come back, and I don't think this will stop the brain drain so much as the fact that the Canadian studios aren't recruiting as aggressively now as they were - not to say there aren't roles, but most are relatively fully staffed, and they've now managed to develop most of the experience they need locally anyway. Quebec offers 37.5%, we're looking at 25% - and our program is split between games, animation, tv and film. I'd have thought that, in terms of brain drain, the tax breaks will have minimal effect.

Anyway, time will tell, I guess.

Edited 1 times. Last edit by Fran Mulhern on 6th December 2012 12:50pm

Hopefully we can educate our graduates better in both business and games development before this money is allocated.
What we need is more powerful Briitish owned development and publishing companies... We need a handful of UK oriented and majority UK controlled publishers with some clout... strengthening of the bigger dev studios that exist and twenty or so high quality small development studios generating new IP and genuinely owning their companies, that means not losing huge amounts of shares for relatively small amounts of capital early on in a new companies life... which now seems to be the established norm.

I wonder how this will work for tech companies? Pitbull are doing some amazing stuff, and really deserve to be supported - they're epic's "go to" studio for developing the Unreal engine, and I really don't think there's a more exciting studio in the UK right now. It's people like Bob Troughton, or Ron Ashtiani, or Jason Avent, or Paul Porter, who will really power the next round of studios (and already are) - hopefully they'll all be able to get help, though I have a feeling the cultural test may mean it's related purely to games themselves.

1/ defining what the cultural test involves
2/ passing the cultural test past EU (whilst countries will undoubtedly make it trickier for UK to run this legislation through)
3 coverage of what the qualifying expenditure covers (from the service sector to post production to production)

Fran: thanks for that. I suspect that the breaks will go to the large development bodies that make up most of UKIE and TIGA, though. Actuallly, where are those guys this time..? They're usually spamming the press with their "we worked so hard to bring the industry these breaks, it's all thanks to us," etc ... drives me mad.